OREANDA-NEWS. Fitch Ratings has downgraded 18 tranches and placed two tranches on Rating Watch Negative (RWN) of six structured finance (SF) transactions that are credit-linked or have significant direct credit exposure to the United Kingdom sovereign. The rating actions follow the downgrade of the UK's Long-term Issuer Default Rating (IDR) to 'AA' (see 'Fitch Downgrades United Kingdom to 'AA'; Outlook Negative' dated 27 June 2016). A full list of rating actions and affected tranches is below.

KEY RATING DRIVERS

Direct UK Sovereign Exposure

The tranches below have either significant direct exposure or full credit linkage to the UK sovereign and have therefore been downgraded in line with the sovereign IDR or placed on RWN.

Annington Finance No.1 Plc and Sceptre Funding No1 PLC rely entirely on rental payments from the central UK government for note repayment.

The Honours plc and Chepstow Blue plc are securitisations of credits relating to student loans and social housing respectively. The cash flows for these transactions indirectly rely on payments/guarantees from the state.

Leek Finance 18 and 19 are part of a series of RMBS transactions with loans originated by a subsidiary of The Co-operative Bank PLC (B/OutS/B). As part of a restructuring in June 2011, UK government gilts were added to the collateral portfolio, providing a significant portion of the credit enhancement available to the notes. Following the downgrade of the UK, the agency has taken rating actions on the notes previously identified as having their ratings capped at that of the UK. Class B and C in Leek 18 and class B, C, and D in Leek 19 were downgraded correspondingly to 'AAsf';Outlook Negative. Class M in Leek 19 has been placed on Rating Watch Negative, subject to further analysis, to determine if its current rating can be maintained without the support of the gilts.

Other SF Transactions Not Affected

The immediate effect on SF ratings as a direct result of the outcome of the recent referendum and subsequent UK sovereign downgrade is limited to the tranches listed below. Other UK SF tranches do not have the direct credit linkage to the sovereign's credit strength and therefore Fitch is not taking other immediate rating action relating to the referendum outcome.

Fitch will monitor the performance outlook for UK SF transactions for signs of other effects from the referendum outcome. Revisions to UK economic expectations, particularly those that relate to unemployment and the housing market, have the potential to affect the medium term performance of SF transactions and therefore ratings, as set out in the scenario report prior to the referendum (see 'Leave or Remain: Hypothetical Brexit Scenarios Examined').

RATING SENSITIVITIES

The ratings of the tranches below remain principally exposed to the creditworthiness of the UK sovereign and therefore a change in the sovereign IDR is likely to result in a change in the ratings.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the transactions. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted any reviews of origination files as part of its ongoing monitoring.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

- Rating of United Kingdom (AA/Negative/F1+)

Fitch has downgraded/ RWN the following ratings:

Annington Finance No. 1

8% secured bonds due 2021 (XS0070337372) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Sceptre Funding No 1 plc

Class A (XS0441698866) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Honours plc

Class A1 (XS0273149962) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class A2 (XS0273152677) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Chepstow Blue plc

Class A1 (XS0445087702) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class A2 (XS0445087884) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Leek Finance Number Eighteen Plc

Class Ba (XS0271277971) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Bc (XS0271281817) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Ca (XS0271278433) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Cc (XS0271282039) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Bc Currency Swap Obligation downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Cc Currency Swap Obligation downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Leek Finance Number Nineteen Plc

Class Ma (XS0294483614) 'AA+sf'; placed on Rating Watch Negative

Class Mc (XS0294484349) 'AA+sf'; placed on Rating Watch Negative

Class Ba (XS0294484778) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Bc (XS0294485072) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Ca (XS0294485403) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Cc (XS0294486476) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Da (XS0294486559) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative

Class Dc (XS0294486716) downgraded to 'AAsf' from 'AA+sf'; Outlook Negative